I am not going to mention the C word. Or the B word. You know the ones I am talking about. They are not swear words, but they have had the effect of swear words in causing people to react to what they are doing and consider whether there is a need to moderate behaviours in the future. The development market in the UK has had no more immunity from the effects of the C word and the B word than anybody or anything else out there and is reacting accordingly.
What is interesting in the marketplace at present is that construction and sales have moved on at pace in the last six months or so, helped a great deal by the Government’s considered focus on bending over backwards to keep the wheels of certain sectors in motion.
Residential sales of new builds are being secured at a remarkable rate without the need for high levels of incentives and sales extras. At Shoosmiths we deal with about 10,000 new-build transactions in a 12-month period at present and demand is high, and reservations and completions are at record levels.
At the time of writing there seems to be no obvious slowdown in the work levels being experienced at Shoosmiths throughout the UK and (with a fair wind) we expect to finish this financial year (end of April) with a very strong set of figures. This has been helped by the diversity of our portfolio and the office coverage we have throughout England, Scotland and Northern Ireland.
But when you look back at the budgeting exercise we carried out last March in anticipation of a torrid year ahead, we can now see that we were very conservative in our crystal ball gazing exercise. Not unnaturally, we thought the market would show dramatic signs of a sustained slowdown, and whilst that was indeed true in real estate during the first lockdown, other areas of our business continued to thrive.
Since the summer of 2020, the real estate market across many sectors has moved on apace, and clients remain confident and busy. The recent statement by the Governor of the Bank of England that is signalling a very strong economic bounce back from the Spring of 2021 onwards is likely to inject further confidence into the same clients. And, notwithstanding the possible/probable termination of the Stamp Duty holiday at the end of March, consumers are likely to remain in bullish mood throughout the warmer months of 2021. It must also be very likely that retail, hospitality and leisure will see a huge surge in productivity and profitability as the UK escapes bit by bit from the constraints of the current restrictions. And the fact that most people will holiday in the UK this year is likely to add to consumer spending considerably.
There is a focus at present on what the future is going to look like. From a residential point of view that means perhaps a continuing flight to regionalisation as more customers seek out open spaces, gardens and houses in lieu of flats. From an office point of view, that means that employers will need to be more wary and flexible as to their own office requirements. Ironically, at least in the short to medium term, the size of the office space required to conduct business is less likely to drop due to social distancing requirements. But longer term, it seems inevitable that office space requirements will reduce as business looks at more flexible options. And that in turn will possibly release more stock for office to residential conversions.
Unsurprisingly, the logistics sector is showing no signs of a lack of demand and in the marketplace investors see logistics as a strong investment. The same can be said of the care sector. We act for a number of later-living developers, occupiers and investors and demand is extremely high for bed spaces and senior lifestyle living choices. This sector continues to improve its delivery of quality and variety of living experiences for a growing older population the UK, taking on board best practice from the US and Australia.
For more information contact Shoosmiths at www.shoosmiths.co.uk
Partner at Shoosmiths